Becoming a more resilient leader

We live in uncertain times. As such, business leaders need to be able to deal with temporary setbacks and recover quickly when things go wrong.

Managers are faced with different challenges every day. These might

include managing conflicts, dealing with increasing regulatory change or difficult trading conditions. Having the ability to cope effectively when under

pressure is essential. So how do you become a more resilient manager?

Focus on your strengths

In the face of adversity, remember the strengths that have gotten you where you are and ask yourself how they can be applied to overcome the current challenge.

Take time to reflect

Whether you’re celebrating success or enduring tough challenges, make time to reflect. Reflection fosters learning and helps you to develop new perspectives and a degree of self-awareness that can enhance your resilience.

Don’t ignore the negative

Resilient managers see negatives and risks, but don’t dwell on them.  Instead focus on reframing issues in a more proactive direction. Negative challenges are best seen as opportunities to learn.

Define your purpose

Developing a sense of purpose gives your work meaning and helps you put it into a larger context. A clear sense of purpose helps you to assess setbacks within the framework of a broader perspective. It also helps others in your firm to understand what you are trying to achieve.

Build relationships

Resilient business leaders build relationships with colleagues and bring those colleagues along with them. Developing good relationships with colleagues creates a strong base of support which is critical in helping

managers to achieve objectives, develop perspective and make difficult decisions.

Keeping your website up to date for Google searches

Google is still the world’s most popular search engine. Google’s search engine algorithm is continuously being updated so how do you keep your firm’s website up to date so that you show up in online searches?

More than 2.3 million Google searches are conducted every single minute. The top 5 search results on Google get over 70% of the click through traffic. There is no point in being on the second or third page of search results – people don’t tend to look that far. Your firm needs to be in the top half of the first page in order to allow potential customers to find your business online.

Keeping your website up to date for Google searches

Mobile search is also on the rise – 88% of smart-phone users are searching on Google. As such, you should make sure that your firm’s website is optimized for smart-phone screens as well as computers and tablets.

Google offers a free service called Google Search Console. This service allows you to submit your website to Google for indexing.

You can also use the tool to identify any potential search related errors on your site, view the kinds of search queries that are driving traffic to your site, etc.

You can also link your firm’s website to Google My Business. This can help

your website to appear in relevant geographic search results.  Google will then send a postcard to verify your business’s physical address and your firm will show up if people are searching for a business like yours in the local area.

The speed at which your website loads also affects the way it is ranked by Google. Google ranks faster loading sites higher than slow websites.  You can make your site load faster by minimising the size of image files and using fast hosting services.

Finally, ensure that you use relevant keywords in your page titles, meta descriptions, URLs and throughout your actual content. Don’t use too many keywords as this can actually have a negative effect on your site’s Google ranking. If in doubt, consider hiring in an external consultant to help you.

Tax Diary May/June 2019

1 May 2019 – Due date for Corporation Tax due for the year ended 30 July 2018.

19 May 2019 – PAYE and NIC deductions due for month ended 5 May 2019. (If you pay your tax electronically the due date is 22 May 2019)

19 May 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 May 2019.

19 May 2019 – CIS tax deducted for the month ended 5 May 2019 is payable by today.

31 May 2019 – Ensure all employees have been given their P60s for the 2018-19 tax year.

1 June 2019 – Due date for Corporation Tax due for the year ended 31 August 2018.

19 June 2019 – PAYE and NIC deductions due for month ended 5 June 2019. (If you pay your tax electronically the due date is 22 June 2019)

19 June 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 June 2019.

19 June 2019 – CIS tax deducted for the month ended 5 June 2019 is payable by today.

Don’t forget the payslips

If you are an employer, you have a statutory duty to provide your employees with a copy of their P60 (pay and tax details for 2018-19) on or before the end of May 2019.

If you distribute P60s and then discover that changes need to be made you will need to give employees a replacement P60 – a paper or electronic version – or a letter confirming the change.

This requirement is additional to your other filing deadlines related to your payroll and later in the year you will need to deal with the reporting of expenses and benefits to HMRC.

If we take care of your payroll for you, these matters can be dealt with in a timely manner. If we don’t take care of your payroll, and you would like to be relieved of this tiresome chore, please call so we can discuss your needs.

Income Tax – regional differences

You will pay Scottish Income Tax if you live in Scotland, Income Tax if you live in England or Northern Ireland and the Welsh Income Tax if you live in Wales.

At present, the only regional variations under the control of the Scottish or Welsh governments are the rates of Income Tax charged.

For 2019-20, the rates set by the Welsh Government are the same as those in England and Northern Ireland. Scottish Income Tax rates have more bands and the higher and top rate are 1% higher than the rest of the UK.

These differences do open up planning opportunities if you live and work in the border areas between England and Scotland.

As you pay tax at Scottish or other UK rates based on where you live, you could choose to live in England and work in Scotland if you pay tax at the higher rates. Obviously, there are many other factors that you will want to consider when choosing where you set up home, but if the regional Income Tax rate differentials start to widen, the ability to reduce your Income Tax burden may become more of a deciding issue.

Can you change a will after death?

On the face of it, this sounds implausible. How can you change your will if you have died?

In reality, as long as any beneficiaries left worse off after any change, agree, you can change a person’s will after their death.

Any change must be completed within two years of the death.

The circumstances that such a change can be agreed are to:

  • Reduce the amount of Capital Gains Tax or Inheritance Tax payable,
  • Provide for someone who was left out of the will,
  • Move the deceased’s assets into a trust,
  • Clear up any uncertainty over the will.

Executors will need to make a variation to the will to accomplish the above, this will involve:

  • Preparing a variation document that satisfies certain legal requirements, and
  • If there is more Inheritance Tax to pay, a copy of the variation must be sent to HMRC within six months of making it. This condition does not apply if the variation does not change the amount of Inheritance Tax payable.

This ability to change a will after death can often resolve family disputes if the affected beneficiaries agree. However, the process is best managed by a professional advisor to ensure that all the formalities are dealt with correctly.

Expenses you can set-off against rental income

The expenses you claim against your property income will need to follow the usual HMRC ruling that the costs must be incurred wholly and exclusively for the purpose of renting out the property.

An example set out on the Gov.uk website illustrates the point:

If you buy a new vacuum cleaner for your own home, and also use it to clean your rental property between tenants, you can’t claim the cost of the vacuum cleaner as an expense against your rental income.

However, you could claim the cost of any cleaning products you bought specifically for cleaning the rental property.

Where costs are incurred partly for your rental business and partly for some other purpose you may be able to claim a proportion of that cost if that part can be separately identified as being incurred wholly and exclusively for the purposes of the property rental business.

gov.uk

Expenses you can and can’t claim are summarised below.

Expenses you can claim include:

  • Mortgage interest – a proportion of this cost is now limited to basic rate Income Tax relief,
  • General maintenance and repairs to the property, but not improvements (such as replacing a laminate kitchen worktop with a granite worktop)
  • Water rates, council tax, gas and electricity
  • Insurance, such as landlords’ policies for buildings, contents and public liability
  • Costs of services, including the wages of gardeners and cleaners
  • Letting agent fees and management fees
  • Legal fees for lets of a year or less, or for renewing a lease for less than 50 years
  • Accountant’s fees
  • Rents (if you’re sub-letting), ground rents and service charges
  • Direct costs such as phone calls, stationery and advertising for new tenants
  • Vehicle running costs (only the proportion used for your rental business) including mileage rate deductions for business motoring costs

Expenses you can’t claim a deduction for include:

  • The full amount of your mortgage payment – only the interest element of your mortgage payment can be offset against your income,
  • Private telephone calls – you can only claim for the cost of calls relating to your property rental business,
  • Clothing – for example if you bought a suit to wear to a meeting relating to your property rental business, you can’t claim for the cost as wearing the suit is partly for your rental business and partly to keep you warm – no identifiable part is for your property rental business,
  • Personal expenses – you can’t claim for any expense that was not incurred solely for your property rental business.

All is fair, unless you expect HMRC to minimise your tax bill

Although HMRC refer to taxpayers as customers, and thereby suggest a degree of customer service, in the real world this rarely extends to offering “customers” pro-active tax advice.

Historically, tax collectors are trained to maximise the assessment and collection of tax. Consequently, tax payers should be wary, they should check the tax statements that are delivered in brown envelopes and make sure that they have taken advantage of reliefs and allowances available to them.

Take for instance the personal tax allowance. Not much to go wrong here you might think. For 2016-17 your personal tax allowance amounts to £11,000 and this amount will be deducted from your taxable income before any calculation of taxes due is made; or will it?

Three planning issues for 2016-17 come to mind:

  1. Will your total income be under £11,000? Consider Peter and Jane. They are married, Peter’s income is below £11,000 and Jane is a basic rate, not a higher rate taxpayer. Peter could transfer up to £1,100 of any unused personal allowance to Jane. This would save Jane £220. HMRC are aware of Peter and Jane’s earnings and yet they require the couple to make an election and claim the relief. Which is fine if Peter and Jane are aware of the relief. HMRC are apparently surprised that a large number of couples who could claim the relief do not.
  2. If you are in business, there is a very generous allowance you can claim if you buy qualifying commercial vehicles or equipment. Since 1 January 2016, you can deduct the full costs up to £200,000. If you are self-employed there is a danger that claims such as this Annual Investment Allowance (AIA) could reduce your taxable income below the £11,000 personal allowance threshold. If this occurs, any unused personal allowance is lost – it cannot be carried forwards and claimed in the next tax year. What you could do is restrict your claim for the AIA such that your taxable income equals £11,000 and your personal allowance would be fully utilised. Any balance of capital expenditure could be carried forward and used in future years.
  3. If your income exceeds £100,000 you will lose your entitlement to claim the personal allowance at the rate of £1 lost for every £2 your income exceeds £100,000. This means that when your income for 2016-17 exceeds £122,000 you can no longer claim the £11,000 deduction. Readers who have an interest in numbers will be interested to know that income is taxed at a marginal rate of 60% in this £100,000 to £122,000 band. Tax payers heading for this outcome can take steps to reduce their earnings below the £100,000 trigger point, but HMRC will not advise you on the steps you could take.

The UK has one of the most complex tax codes and many tax payers run the risk of paying too much tax just because they are not aware of the allowances and strategies they could employ to minimise their expose to taxation. We are not suggesting any form of avoidance activity, we are only suggesting that you claim your full entitlement to allowances and reliefs that are available to you. Of course, we would be delighted to be part of the process – call any time for a consultation.

Wholly and exclusively

The title of this posting describes an important concept when considering claims for expenditure to reduce our tax bills.

By and large, HMRC will accept claims that have been expended wholly and exclusively for the purposes of running a business or fulfilling your employment obligations. But what does this phrase actually mean?

Certainly, if you are making claims based on your employment: subscriptions to professional bodies, travel costs, the cost of uniforms, all of which you have paid for, may qualify for a claim. Pound for pound these expenses will reduce your income subject to tax and your tax liabilities.

Obviously, if your employer or business has met the costs, you cannot make a further claim.

There are certain categories of expenditure that can be recovered in this way. For the self-employed they include:

  • office costs, e.g. stationery or phone bills
  • travel costs, e.g. fuel, parking, train or bus fares
  • clothing expenses, e.g. uniforms
  • staff costs, e.g. salaries or subcontractor costs
  • things you buy to sell on, e.g. stock or raw materials
  • financial costs, e.g. insurance or bank charges
  • costs of your business premises, e.g. heating, lighting, business rates
  • advertising or marketing, e.g. website costs

The test you need to apply is always: is the expenditure incurred wholly and exclusively for the purpose of your trade or employment.

HMRC recently published a list of the more outlandish claims they received as part of the 2014-15 tax returns. They included:

  1. Holiday flights to the Caribbean
  2. Luxury watches as Christmas gifts for staff – from a company with no employees
  3. International flights for dental treatment ahead of business meetings
  4. Pet food for a Shih Tzu ‘guard dog’
  5. Armani jeans as protective clothing for painter and decorator
  6. Cost of regular Friday night ‘bonding sessions’ – running into thousands of pounds.
  7. Underwear – for personal use
  8. A garden shed for private use – plus the costs of the space it takes up in the garden
  9. Betting slips
  10. Caravan rental for the Easter weekend.

Readers who are uncertain if the costs they have incurred can be included in their business accounts, or claimed by employees on their tax return, should call for advice. Although the wholly and exclusively rule applies in most cases, there are situations where the “exclusivity” part can be more of a grey area, for example where there is business and a private use element.

A step closer to Making Tax Digital

We have advised readers in previous postings that HMRC seem to be intent on digitising the upload of small business accounting data from April 2018. From this date, affected self-employed traders (including landlords) will be required to upload details of their trading activities on a quarterly basis.

On the 31 January, HMRC responded to the consultation with interested parties regarding the way in which the MTD process will work in practice.

Many of the initial features remain unchanged:

  • The self-employed will be required to file from April 2018.
  • The lower income limit above which filing will be compulsory remains at £10,000 – although we are likely to see an increase in this figure when the legislation enacting MTD is published in the Finance Bill March 2017.
  • Traders will need to keep their accounting records in a format that can be uploaded to HMRC. Hopefully, spreadsheet templates and other small business software will be available, but traders will need to ensure that they are organised and ready to comply by the April 2018 start date.

Once the MTD process is activated, the need to file a self-assessment tax return each year will be discontinued. It will be replaced by the four quarterly uploads and an annual final check to ensure that all relevant reliefs and adjustments to accounts data are in place.

This is a huge change in the reporting of information to HMRC. As the April 2018 date approaches we will be working with clients to ensure they are fit for purpose. More than 600 accounting software providers are working with HMRC to ensure that their software will accommodate the uploads to HMRC.

Clients who are concerned by this change and want advice on the implications for their business are welcome to call for an update. Please bear in mind, that until we see formal legislation on this topic later in the year the precise details of who is affected, and how the upload process will work in practice, are still uncertain. What seems to the case, is that we have moved a step closer to Making Tax Digital.